Why is VAT compliance more complex for the food and beverage sector?
Food and beverage products rarely follow a single VAT treatment across jurisdictions. EU countries apply different rates and classifications depending on whether the item is a staple food, a luxury product or a beverage.
For example:
Germany applies a 7% reduced rate to most basic foods, but 19% to alcohol.
Poland uses 5%, 8%, or 23% depending on product type and processing.
In the UK, most staple foods are zero-rated, but soft drinks and confectionery are taxed at the standard rate.
For companies selling dietary supplements, the challenge is even greater. Some Member States classify supplements as food (which attracts a reduced rate), while others treat them as standard-rated health products. Getting this wrong can mean underpaying or overpaying VAT, mispricing products and triggering audits; burning time and effort in resolving.
Do OSS and IOSS provide a solution?
One of the main VAT compliance issues for businesses selling cross-border in the EU is the complexity arising from navigating 27 different national VAT systems and the administrative burden of needing multiple VAT registrations. This provides a level of intricacy for the finance team, requiring specialist knowledge to ensure compliance.
For those business leaders looking at growth across the EU, the One Stop Shop (OSS) and Import One Stop Shop (IOSS) schemes are designed to simplify VAT reporting for B2C cross-border sales by consolidating obligations into one filing.
While OSS and IOSS reduce administrative work, the responsibility for applying the correct VAT rate in the customer’s country remains with the seller. That means accurate product classification and rate mapping are critical, especially when selling food, beverages or supplements with differing treatments across borders.
Changes to packaging compliance with EPR
While Extended Producer Responsibility (EPR) schemes have existed for years, requiring producers to register and report packaging placed on the market; a new EU-wide regime came into force in February this year, tightening obligations and linking fees to the recyclability of packaging.
For food and beverage businesses, where packaging is integral to the product, this adds a layer of ongoing compliance. Companies must now:
– Track material data accurately
– Register in each country where goods are sold
– Adapt to new eco-modulation fee structures based on packaging design.
So what should you prioritise for EPR?
Three countries are especially critical for exporters:
United Kingdom: The new EPR regime is being phased in, with large producers required to collect and report packaging data now and submit full reports from 2025.
Germany: The VerpackG (Packaging Act) requires registration in the LUCID database and participation in a dual system for any packaged goods sold on the German market.
Spain: Since January 2023, Spain’s plastic packaging tax applies to all non-reusable plastic packaging, including imported goods. Even EU-based companies selling into Spain must appoint a local representative to manage reporting and payments.
These obligations can catch even experienced exporters off guard and need to be integrated into expansion planning.
What risks do you face in delaying VAT or EPR compliance?
The operational and financial risks for CEOs and CFOs are significant :
– Misclassification of products can lead to underpaid VAT and retrospective corrections.
– Delayed market entry occurs when packaging or VAT registrations are not in place.
– Cash flow disruptions can result from rejected invoices due to non-compliance.
– Reputational risk arises from being flagged by tax or environmental authorities in multiple markets.
For food and beverage companies, where margins are often tight and volumes high, small mistakes compound quickly.
How have companies solved these challenges in practice?
Case Study 1: Food Supplements – getting VAT classification right across Europe
We work with clients in the food supplement sector who sell to all EU Member States and beyond. One of their biggest challenges was ensuring correct VAT rates on every product in every country. In some jurisdictions, their products were treated as food and eligible for reduced rates; in others, they were standard-rated.
We conducted a product-by-product, country-by-country VAT classification review and built a rate mapping system integrated into their VAT/OSS reporting. This allowed them to charge customers correctly, reduce audit exposure and maintain consistent pricing strategies.
Case Study 2: Packaged food and Spain’s plastic tax – managing new EPR obligations
One of our clients sells packaged food products across Europe. Their VAT compliance was strong and they were already using OSS effectively; the challenge came with new EPR rules, particularly Spain’s plastic packaging tax.
Even as an EU-based company, they were surprised to learn Spain requires a local representative for plastic tax reporting. We supported them by appointing the representative, registering them for Spain’s regime, and aligning their UK and German EPR reporting into a single, scalable workflow. This allowed them to avoid delays, maintain market access and future-proof their packaging compliance.
What steps should CEOs and CFOs take now?
– If you are currently selling within Europe, or you’re scaling up growth for a new market, then take the time to consider whether the business is at risk. Ensure your finance and operations teams:
– Review VAT classification for every product across all current and target markets.
– Map EPR obligations, including representative requirements.
– Integrate packaging data collection into ERP or accounting systems early.
– Treat VAT and EPR compliance as part of the growth strategy, and don’t leave it as a follow-on.
Is your compliance framework ready to grow with your business?
For food and beverage companies, VAT and packaging compliance are technical requirements and fundamental to scaling operations profitably and sustainably. Early planning and correct classification can be the difference between seamless expansion and costly disruption.
Tax Desk supports businesses navigating these challenges across key EU markets. If your company is preparing to expand or wants to ensure its compliance infrastructure is future-ready, now is the time to act.
Contact us to discuss your VAT and EPR obligations and build a framework that supports growth.
Download out latest guide: Making VAT compliance your bread and butter removing VAT and EPR complexities for Food & Beverage companies.
